Fixed Deposit / Get FD done in your wife's name instead of your own, very few people know the benefits

Fixed Deposit: FD is one of the most preferred and safe savings schemes among Indians. Although the attraction of mutual funds and stock market is increasing rapidly, FD has its own place. The biggest feature of FD for investors is that it provides fixed returns with guarantee. Especially for those who do not want to take risk, FD is still the most reliable option.

If you are married and planning to make a fixed deposit, then you can consider some special strategies to save tax. In this article, we will discuss how you can avoid paying tax and TDS (Tax Deducted at Source) by making an FD in the name of the wife.

TDS and tax liability on FD

TDS has to be paid on the income from fixed deposit. If the interest received from FD exceeds ₹ 40,000 in a financial year, then 10 percent TDS is deducted on it. Apart from this, the interest income is added to your total income and the tax rate on it is applicable according to your tax bracket. If you fall in a higher tax bracket, you have to pay more tax.

How will you save tax by making an FD in your wife's name?

If you make a fixed deposit in your wife's name, you can avoid TDS and additional tax levied on you. The main reason behind this is that most women either fall in the lower tax bracket, or they are housewives who do not have any income tax liability. In this situation, making an FD in your wife's name can reduce your tax burden.

If your wife's income is limited and she earns interest of less than Rs 40,000, then she can also avoid paying TDS by filling Form 15G. This will not deduct TDS from her, and you will also save tax.

You can also get benefit from joint FD

If you make a joint FD with your wife and make her the first holder, you can still save tax. In joint FD, TDS and tax are determined according to the income tax status of the first holder. If your wife's income tax status falls in a lower tax bracket or she is a housewife, then you can get its benefit in the form of tax savings.

Conclusion: Invest wisely

Fixed deposit is an investment option that gives safe and guaranteed returns, but it also has the possibility of tax savings. If you plan your investment wisely and make an FD in your wife's name, it can help reduce your total tax liability.

It is advisable that you discuss tax planning with your financial advisor, so that you can get maximum benefit from fixed deposits and other investments.